If you title your home or bank account with another person as joint tenants, the law is clear that the surviving owner automatically takes title upon the first owner’s death without probate. Sounds great and is the right choice is some cases. This way of titling assets often works well with spouses but there are several cases when this is simply the wrong way to handle things.
The first point to make is that many people assume that their will or trust governs all their assets. The will, for example, might say that upon my death all my assets go to my children in equal shares. This will, however, will not control a joint bank account where you name one of your children as joint owner. This is commonly done with the logic that this child has easy access to the account to pay bills and they can just take care of things right away after death and not wait around for probate. The concern is that this way of titling means that the joint owner is entitled to all the money and doesn’t have to share with his or her siblings. Even if that child wants to split the account, if he or she has creditors or is in a divorce proceeding that account might be frozen and used to pay off the child’s creditors. From a more practical standpoint, its really hard to know after a parent dies if that account was really supposed to be split or maybe one child is intentionally getting more as they were the one who handled all the finances or helped take care of the parent before death. A combination of powers of attorney and beneficiary designations can accomplish the same goal (easy access and no probate) without any fear of foul play or just plain uncertainty.
Another common problem with joint tenancy occurs when a parent deeds land to all the children prior to death. This could be done to avoid probate or potential medical assistance issues. The issue is how is that deed drafted. If the deed conveys title to all the children as joint tenants, if one of the children dies before the land is sold, their share simply terminates and the remaining children now own the land. In other words, that child’s spouse or children will not share in the sale proceeds. That may be the intent but often the parent really wants each child or their heirs to receive their share. In that case, the deed should be clear that the children are receiving title as tenants in common and not as joint tenants.
The concerns with joint tenancy can become an issue before the first death as well. While you hold title as joint tenants with a child or sibling, all joint owners would have access to the account for any reason and also have legal obligations to any expense. In nearly all cases, the intent is that the original owner of the asset really should pay all expenses and income or available balances should be used for the benefit of the original owner. Unfortunately, that’s just not how joint accounts work. Any owner can withdraw funds for any reason. On the other hand, if your child is named as power of attorney, the law is clear that this child can access the account but the account may only be used for the benefit of the parent.
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